EchoStar’s AWS-3 Deal with SpaceX & T-Mobile’s Text-to-911 Move

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and sixty ninth episode of the week with Roger, conversation between analysts about things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, with me, as always, is Roger Entner. How are you doing, Roger?

Roger Entner 0m23s

I'm great. How are you?

Don Kellogg 0m24s

I'm good. So Roger, Charlie and Elon are back in the news. I thought we could talk about it. These are both fertile grounds for a discussion.

Roger Entner 0m32s

Yeah. Here we thought that we would not talk about Charlie anymore, but, you know, the man surprises.

Don Kellogg 0m38s

And it's only been what, three weeks, right?

Roger Entner 0m41s

Yeah, but that's his thing. Charlie surprises. You know, some people have patterns. Charlie's pattern is he surprises. So they had their third quarter earnings call.

Roger Entner 0m52s

When we look at the wireless part, they added, what, 300 and change thousand customers, which surprised everybody. But then when you look at the revenue and especially the cost line, the revenue line disappointed and the cost line went through the roof. Ultimately, what they did is they were buying customers left and right. And so if you want to have net ads and you want to spend enough money on it, you can do that. When I look at this, this is like the swan song of this, because, you know, hand in hand with the earnings call announcement was that EchoStar sold the AWS-three spectrum to SpaceX for about $2,600,000,000 which on one hand is a lot less than what everybody was thinking about this would go for.

Roger Entner 1m48s

On the other hand, it's not. So there were very persistent, good rumors that Verizon would get this. And from what I hear is they bid a lot more than $2,600,000,000 but in cash. This is SpaceX stock that EchoStar is getting here. And I would imagine that, you know, Charlie thinks that $2,600,000,000 in SpaceX stock today is worth a lot more than $8.10, whatever billion dollars that he might have gotten for Spectrum in cash.

Roger Entner 2m28s

The funny thing is, essentially EchoStar is increasingly becoming a public proxy to invest into SpaceX. They have now so much equity in SpaceX that they are becoming a public proxy for it. So to a certain extent, if you want to invest in SpaceX, you can make the legitimate argument that invest in EchoStar and you have some so so business, at least you can figure out how hard it's going to crash. But this is essentially now a SpaceX proxy. The other thing that's really interesting is what is Elon going to do with all the spectrum, right?

Roger Entner 3m9s

Right. Now AWS four, what he already bought from EchoStar, and the AWS three spectrum, which is the unpaired uplink, can all be used for satellite communication. At the same time, people say that Elon is enamored with becoming a wireless carrier. I don't know why, because it's a really tough business. But if he really wants to get into that, why is he not buying this empty network that Charlie has standing around that now has no spectrum attached to it?

Roger Entner 3m47s

It's going to be fascinating what's going to play there, because the overlap between wireless and satellite is real, especially in rural America, and in very, very rural America. And you could see that, by the way, T Mobile also made the announcement this week that even if you're with another carrier, you can sign up with T Mobile for free, and you can do 09:11 texts, even if you're not a T Mobile customer for free if you're in an emergency. On one hand, very noble and good gesture in the spirit of friend of the show, John Ledger, we're going to change wireless for the better and we're going to change everybody for the better. So that's a great thing. On the other hand, it's also another qualified lead list for T Mobile to get customers off the other networks, right?

Roger Entner 4m42s

If you had unfortunately contact 911 while you were with another carrier and T Mobile essentially saved your life, there's a legitimate case to be made to switch, right?

Don Kellogg 4m55s

It sounds like essentially where we're going with all of this, right, is that the era of dead zones is coming to an end, right? Like slowly but surely

Roger Entner 5m4s

I would say dead areas. Dead areas, not dead zones.

Don Kellogg 5m7s

Dead areas, that's fine.

Roger Entner 5m8s

It depends on how big the thing is, right? Dead spots, it's just not flipping over fast enough. Dead spots will be here.

Don Kellogg 5m16s

Well, that's actually part of my complaint about the T Mobile satellite product is that it does flip over too fast, and then it doesn't flip back fast enough. Right? That was my issue with the beta where, like, I'd go behind a hill and then it put me on satellite and then take a couple minutes to come back off it. But that having been said, you know, the era era of dead zones, right, is largely coming to an end, right, which is pretty fantastic for anybody who's driven across Nevada or, you know, Montana or, you know, some of these more remote areas. Sometimes it feels like you're on the surface of the moon and we need help, you really do need help.

Don Kellogg 5m50s

So I think that's fantastic.

Roger Entner 5m51s

Yeah, and I think the roadmap is pretty clear where you will be able to do in very remote areas, everything you can do in San Francisco, Boston, Dallas, New York, whatever, satellite, that means you can talk, you can text, you can watch videos, because the satellite has enough capacity in the middle of nowhere because nobody else is around that you can do this to your heart's content. And so that's pretty fantastic, whereas the satellite will have its issue if you want to do this in, you know, Downtown Miami.

Don Kellogg 6m30s

Right. That's part of why, you know, acquiring more and more spectrum like this, like Starlink is doing, at least partially alleviates that problem. Certainly not in, you know, very, very dense urban areas, but in in more suburban fringe, right, as you get more spectrum, you have more and more, I wouldn't call it encroachment, but overlap with the cellular network and from a capacity perspective.

Roger Entner 6m51s

Oh, the other thing that made me chuckle on that earnings call was that, Amit is now the president, CEO of EchoStar Capital, exit to the left, you know, I'm sure that's only temporary. And that Charlie is again, CEO and chairman of EchoStar. To me, it doesn't matter who Charlie was always in charge, right? Charlie's always in charge. It doesn't matter who has the business card.

Roger Entner 7m20s

The true CEO and chairman of EchoStar is Charlie Ergen. Not only until he dies, probably he finds a way to be that beyond his death. Come a hand comes out from the grave, and like, no. But yeah, he has significant majority of the voting stock of EchoStar. Essentially, it's a privately held company and you're along for the ride, as long as you enjoy.

Roger Entner 7m48s

You know, enjoy it, be part of the ride. And it has been a wild, wild ride. As I've said before, you can't count out the guy. You have to respect that. Over and over he pulls out rabbits out of hats that you know are empty.

Roger Entner 8m4s

And now he he did it again with Deku Star. You need to admire the guy. Hands down. Right. Well, I

Don Kellogg 8m11s

mean, he keeps on making deals that are net positive for him, and other folks keep on dealing with him too. Right? I mean, that's the other piece of this is, you know, when you think of, like, the roaming agreement with AT&T, nobody put a gun to AT&T's head and said do that.

Roger Entner 8m23s

Yeah. It's like

Don Kellogg 8m24s

You know, we wouldn't be here where we are now without that fallback network. Right?

Roger Entner 8m28s

Without that.

Don Kellogg 8m29s

The other players are complicit in this. Right?

Roger Entner 8m32s

Yeah. AT&T gave him a get out of jail card. Right? Right. Good.

Don Kellogg 8m38s

Alright. Well, we'll talk to you next week. I'm sure this won't be the last time we talk about either Elon or Charlie.

Roger Entner 8m43s

Exactly.

Don Kellogg 8m44s

It's always a good chat. All right, thanks, Roger.

Roger Entner 8m47s

All right, I'll talk to you next week.